Dow mounts a rally; Nasdaq falls short

MichaelBaron

NEW YORK (CBS.MW) -- U.S. stocks finished mixed Wednesday as a pullback in oil prices sent the Dow higher but the Nasdaq fell just short in its bid for an eighth straight positive session.

The Dow Jones Industrial Average
DJIA, -0.31%
closed up about 60 points, or 0.6 percent, at 10,263, while the Nasdaq Composite
$COMPQ
surrendered almost 2 points, or 0.1 percent, to finish at 1,989. The Nasdaq's benchmark hadn't posted a loss since May 20.

Equities were helped by oil prices tumbling ahead of a pivotal OPEC meeting on Thursday. Economic reports were light ahead of Friday's key jobs report, which is expected to provide a vital clue to the timing of any eventual interest rate hike by the Federal Reserve.

The blue-chip gains came despite negative analyst opinions on Alcoa, Home Depot and McDonald's. Also, troubled telecom-gear maker Nortel lost ground after it failed to assuage investor concerns with the latest update on its tangled financials, and tech bellwether Intel
INTC, -0.82%
was the biggest decliner in the blue chips, losing 1.1 percent ahead of its midquarter update on Thursday.

"The market's got a pretty good lift in late trading from the rather sizeable decline in oil prices, which ended below the psychologically important level of $40 per barrel," he said. "Still, despite today's somewhat positive market action, a lot of investors seem content to remain on the sidelines."

He said a strong advance by the transportation stocks was heartening for the markets, but that that the failure by chip stocks to participate in the gains was somewhat disappointing. The Philadelphia Semiconductor Index
SOX, +0.28%
lost 2.3 percent.

Boeing reached a two-year high after selling 10 planes to Air New Zealand. Analyst Byron Callan at Merrill Lynch also raised his 12-month price target on the Chicago-based aerospace and defense contractor to $50 from $46, and reiterated his "buy" rating, saying in an overnight note to clients that 7E7 aircraft orders "represent future potential value that has not been explicitly factored in" his forecasts.

J&J, and Procter & Gamble also reached 52-week highs.

United Technologies
UTX, -0.12%
got a slight pop after reaffirming its outlook for a profit of $5.25 a share in 2004, in line with current Wall Street expectations. Also GM gained nearly 1 percent after posting a 6.5 percent increase in auto sales for May.

On the downside, Home Depot
HD, -0.01%
recovered most of its early losses, bouncing to close at $35.67, down 9 cents. The stock scraped a low of $34.85 earlier in the day. Alcoa and McDonald's also finished marginally lower but well above early levels.

Volume reached 1.25 billion on the New York Stock Exchange, and 1.52 billion on the Nasdaq. Breadth was positive on both exchanges with winners ahead of losers, 20 to 13, on the Big Board, and 16 to 15 on the Nasdaq.

Oil, bonds, dollar, gold

Crude futures closed back under $40 per barrel on the New York Mercantile Exchange, nearly wiping out the 6 percent gain from the previous session with OPEC expected to put more barrels of oil into the global market. The cartel formally meets Thursday in Beirut, Lebanon. Ahead of the summit, July crude closed at $39.96 per barrel, down $2.37. July unleaded gasoline closed at $1.2823 per gallon, down 5.2 percent, and July heating oil fell 4.9 percent to close at $1.0115 a gallon. See full story.

U.S. Treasury prices trended lower for a third day, as the bond market considers recent signals of an improved economy and the likelihood of a robust employment count Friday. See full story.

The dollar recovered from two-month lows against the euro in afternoon U.S. trading Wednesday, as the dip in oil prices was seen potentially opening the door to higher U.S. interest rates. Higher rates make the dollar more attractive to foreign investors, but record crude prices are seen by some as persuading the Federal Reserve to go slow with rate increases. See full story.

Gold futures closed at their lowest level in a week, sliding more than $3 for the session, with traders reluctant to push prices above the key $400 level ahead of the week's economic data. See full story.

Corporate news

Shares of Nortel Networks
NT
slumped after the Canadian fiber optics giant said that it's not ready to issue fully revised financial results going back to 2001.

The company, which fired its CEO last month after discovering a pattern of suspicious accounting, largely reiterated its previous preliminary results.

Nortel said it expects to post a loss instead of a profit in the first half of 2003, and that prior-year sales so far remain unaffected. Looking ahead, the company expects sales to grow faster than the overall market. Although Nortel is "is moving as aggressively as we can," new CEO William Owens said, "we're committed to getting the facts and getting them right." The stock fell about 6 percent. See full story.

Analyst Aram Rubinson at Banc of America Securities made the bearish call on Home Depot, dropping his rating to "neutral" from "buy," due to increased concerns about flattened traffic and the lack of catalysts to raise the price target.

Rubinson said that, even without a rise in interest rates, he believes it's unlikely that the housing market will show increases over the prior year, which could lead to negative same-store sales in 2005. He also noted that "the spike in ticket looks a lot like 1994 and 1999, just prior to deteriorating fundamentals and severe underperformance." See full story.

The standout percentage gainer of the morning was Allos Therapeutics, which leapt more than 44 percent as investors reacted favorably to the biopharmaceutical company's receipt of an "approvable" letter from the Food and Drug Administration covering its RSR13 treatment.

The company's new drug application seeks approval of RSR13 as a therapy for people suffering brain metastases that originate from breast cancer. The FDA said it will be necessary for Allos to conduct a Phase III trial of RSR13 with about 360 patients as a condition of approval. The stock
ALTH
closed at $2.82, up 87 cents, on tremendous volume of 29.4 million.

Economic data

The number of applications for mortgages in the United States declined 1.2 percent last week on a seasonally adjusted basis, the Mortgage Bankers Association reported Wednesday.

Applications for purchase loans rose 2.2 percent while applications for refinanced loans fell 6.6 percent. Refinancings fell to 34.3 percent of loans from a 36.2 percent share. The average rate on a 30-year fixed loan dropped to 6.24 percent from 6.26 percent.

Sales at U.S. retail chains fell 0.5 percent for the second straight week last week, according to the International Council of Shopping Centers and UBS. The ICSC/UBS index is up 5 percent year over year.

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